Charitable trusts 

A charitable trust is a trust for purposes rather than for people. That single feature drives almost everything distinctive about it: who can enforce it, how long it can last, how certain its objects must be, and what happens when its purpose becomes impossible.

Why purpose trusts are usually void

A private trust needs beneficiaries. Someone must be able to come to court and compel the trustee to perform, and the beneficiaries collectively own the equitable interest. A trust for an abstract purpose generally fails for want of anyone with standing to enforce it — the beneficiary principle.

Charitable trusts are the great exception. They are enforced by the Attorney-General on behalf of the public, so the absence of beneficiaries is no objection. Several other rules relax at the same time:

• Certainty of objects is satisfied by a general charitable intention. The trust will not fail merely because the settlor did not identify particular recipients, and the court can supply a scheme.
• The rule against perpetuities does not limit duration. A charitable trust may endure indefinitely, and property may pass from one charity to another without offending the rule.
• Fiscal concessions attach, which is why the question of charitable status is so often litigated in revenue cases rather than trusts cases.

The heads of charity

The general law classification derives from the preamble to the Statute of Elizabeth and its restatement into four heads:

1. Relief of poverty. Poverty means straitened circumstances rather than destitution.
2. Advancement of education. This extends beyond formal instruction to research, provided the results are disseminated, and to institutions such as museums and libraries.
3. Advancement of religion. The courts do not adjudicate on the truth of religious doctrine.
4. Other purposes beneficial to the community within the spirit and intendment of the preamble. The fourth head is not open-ended; a purpose must be analogous to those already recognised.

The Charities Act 2013 (Cth) sets out a longer statutory list for Commonwealth purposes — health, education, social or public welfare, religion, culture, human rights, the environment, animal welfare and more.² The statute governs Commonwealth taxation and ACNC registration; the general law continues to govern whether a trust is valid as a charitable trust, so an answer should identify which question is being asked.

Public benefit

Every charitable purpose must benefit the public or a sufficient section of it. Two elements:

• Benefit — the purpose must be beneficial, judged objectively. The settlor's belief that a purpose is beneficial is not decisive.
• Public — the class must not be numerically negligible, and must not be defined by a personal nexus such as employment by a particular company or descent from a named individual. The relief of poverty is treated more indulgently, and "poor relations" trusts have been upheld.

Benefit is presumed under the first three heads and must be proved under the fourth, though the statutory scheme has qualified that presumption for Commonwealth purposes.

Political purposes

A trust whose object is to change the law was traditionally not charitable, on the reasoning that a court cannot determine whether a change in the law would benefit the public. Aid/Watch Incorporated v Commissioner of Taxation (2010) 241 CLR 539 held that Australia has no such general doctrine: the generation of public debate about how governmental activity should be directed can itself be beneficial, because our constitutional system assumes it.¹

That does not make every advocacy body charitable. The purpose must still fall within a recognised head and satisfy public benefit, and a body whose object is to support a particular party or candidate remains outside charity.

Exclusively charitable

The purposes must be exclusively charitable. A trust for "charitable or benevolent purposes" fails because the disjunction permits application to non-charitable ends. Statute in several jurisdictions saves such trusts by severing the non-charitable purpose or confining the trust to charitable application, so check the local provision before concluding failure.

Ancillary non-charitable activities are permitted where they are merely a means to the charitable end.

Cy-près

Where a charitable purpose fails, the property does not necessarily result to the settlor. Under cy-près, the court may apply it to a purpose as near as possible to the original.

The doctrine is available where the purpose fails at the outset — initial failure — only if the settlor had a general charitable intention rather than an intention confined to the particular institution or object. If the gift was to a specific named charity that never existed or has ceased, the question is whether the settlor's dominant purpose was charity generally or that body alone.

Where the purpose fails after the trust has taken effect — subsequent failure — the property is already dedicated to charity and cy-près applies without any need to prove general charitable intention.

Statutory schemes have widened the grounds beyond impossibility to include purposes that have ceased to provide a suitable and effective use of the property, or where the original purpose has been adequately provided for by other means.

Applying this in a problem question

1. Identify whether the question is about trust validity, revenue treatment, or regulatory registration, because the governing definition differs.
2. Place the purpose within a head of charity, and say which.
3. Test public benefit separately, addressing both benefit and the public element, and note where benefit is presumed.
4. Check that the purposes are exclusively charitable, and look for a saving provision if they are not.
5. If the purpose has failed, classify the failure as initial or subsequent before asking whether general charitable intention must be proved.

Self-check

• Have I named the head of charity rather than asserting the purpose is "good"?
• Have I dealt with benefit and the public element as two questions?
• Have I checked for a disjunctive "or" that takes the trust outside exclusivity?
• Have I classified the failure before deciding whether general charitable intention matters?
• Have I distinguished the statutory definition from the general law of charitable trusts?